B of A Will File Insurance Claim Over Paraguay Loss

Bank of America says it will ask Lloyds of London to repay it for about $60 million in loan losses in Paraguay caused by “employee malfeasance.”

A spokesman said Tuesday that the giant San Francisco-based bank would file a claim under its fidelity policies covering employee theft and fraud. He said the losses had been written off or absorbed by 1984, so any recovery from the London insurer would add to the bank’s current earnings.

The bank would not identify the former employee nor give any indication as to the nature of the “malfeasance.” It also would not comment on whether the loans were to government or private entities.

The losses occurred in 1982 and 1983, but the bank filed the claim now because it had received “new information” about the employee’s activities. No civil or criminal charges have been filed in the affair, the bank said.

Bank of America operates four branches and a finance company office in Paraguay. Total lending there represents “well under 1%” of the bank’s $117 billion in assets.

Earlier this month, the bank sued two insurers seeking to recover $95 million in losses from an alleged mortgage fraud. The losses were caused in part, the bank said, by “gross negligence” by six bank employees. The policies under which the bank sought reimbursement covered the bank against employee incompetence, not against fraud or theft.